In view of ANZ analysts, the gloom hanging over China’s economy is unlikely to go away soon due to challenges on both domestic and external fronts.
“With key economic indicators posting downside surprises over the past few months, we expect China’s Q2 GDP to test a historic low of 6.2%, when the data is released next Monday, 15 July. Although domestic demand could have given a boost to economic activities such as infrastructure investment, there aren’t yet signs of a robust recovery despite the fund-raising efforts of local governments via bond issuance. Consumer demand has also been a concern as automobile sales have slumped by more than 17% y/y in the past two months. To stabilise growth, the People’s Bank of China (PBoC) will maintain an accommodative bias for the rest of the year, in our view. We expect the central bank to trim the 7-day reverse repo rate by 5bps, as well as shave 100bps from the reserve requirement ratio (RRR). We also expect the 10Y CGB yield to breach the 3.00% mark in the next few months.”
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